Self-Judging Security Exception Clause as a Kind of Carte Blanche in Investment Treaties: Nature, Effect and Proper Standard of Review

The basic purpose of Bilateral Investment Treaties (BITs) is to protect foreign investors. However, states have always sought to preserve a range of their sovereign powers, especially in emergency situations, to balance the investor-state relationship. Accordingly, given the importance of security issues and their relationship to the very existence of a country, states tend to include the self-judging security exception clause in investment treaties.¹ Under this clause, states have the right of non-compliance with regard to international obligations and may take necessary measures in cases where their security interests are endangered. If such measures conflict with investors’ rights, this will not be considered a breach of treaty obligations. On the one hand, this clause allows the state to derogate from its international obligations under certain circumstances, while, on the other hand, the evaluation of such circumstances is not performed fully objectively from an external point of view, but primarily from the point of view of the state concerned.² Accordingly, the self-judging security exception clause can be defined as a provision in investment treaties under which a state has the right to unilaterally declare certain treaty obligations as non-binding if, according to its subjective determination, respecting the treaty obligations will harm its essential security interests. Thus, by means of the self-judging clauses, states are conferred with discretion to prioritize their security interests over international responsibilities.

Before addressing categories of the security exception clause, it is worth articulating the structure of such clauses. Even though there are slight differences in the formulations of the security exception clauses in the BITs of various countries, they contain similar conditions that have to be met. According to some scholars, security exception clauses generally contain two elements: (1) a permissible objective and (2) a nexus requirement.³ As far as the first element is concerned, a permissible objective is considered the ultimate goal for the adoption of measures contrary to a state's treaty obligations. In the security exception clause, as the title indicates, security interests are considered permissible objectives. Regarding the second element, the nexus requirement mandates that measures taken by a state must be appropriately related to security interests. This denotes that there must be a link between the measures taken and the security interests’ objectives.

As to...